In 2015 the US government spent over half a billion dollars on a $38,000 non-lifesaving drug with a wide range of cheaper alternatives, making it one of the top 20 expenses for Medicare Part D, a prescription drug program.

What's more, according to a study by doctors at Oregon State University, this drug is prescribed by less than 1% of doctors in the US.

The drug is called H.P. Acthar, and it is a blockbuster for Mallinckrodt Pharmaceuticals, the company that acquired it in 2014. But it is also old enough that it never went through the clinical trials the government requires of a new drug today. Its main use is to treat infantile spasms, but Medicare — a program for the elderly — spent $504 million on it because it is also prescribed as a treatment for 18 other diseases, including multiple sclerosis.

What caught the attention of researchers at Oregon State was how much more expensive the government-subsidized Acthar was than some of its competitors — sometimes tens of thousands of dollars more. The researchers wanted to know why such a small number of doctors had come to prescribe such a costly drug to sick adults. Their study is offering fresh ammunition for critics of Mallinckrodt and its model for Acthar.

Those critics include short sellers who are profiting as Mallinckrodt's shares get crushed.

'Who are these people?'

There are some explanations for why the prescriptions could be concentrated among a small number of doctors. Acthar is used only by specialists, and Mallinckrodt says it's a third- or fourth-line treatment, meaning patients using it have tried other options (and perhaps have sought out the doctors willing to prescribe it).Markets InsiderThe researchers who looked into it don't find this or other explanations convincing justifications for the expense to the government.

The study into Acthar prescriptions was conducted by Dennis Bourdette, the chair of neurology in the Oregon Health and Science University School of Medicine, and Daniel Hartung, an associate professor in OSU's College of Pharmacy.

"The list of indications from the FDA are infantile spasms, multiple sclerosis, and then all these other indications that the neurologist and rheumatologist prescribe it for," Bourdette told Business Insider. "There have never been any designed controlled trials or any basis that show that it's superior to synthetic steroids, which brings up the question — who are these people and why are they prescribing this when we have synthetic steroids that work?"

Dosage question

Since Mallinckrodt purchased the drug in 2014, the drug's sale to Medicare Part D patients has exploded. The $504 million the program spent on the drug in 2015 was up from $263 million in 2013, and the increase seems to have come from a jump in the number of doses per patient, government data shows. Medicare spending on Acthar. Andy Kiersz/Business Insider

While just more than 3,100 Medicare Part D users take the drug, the amount of the drug they're taking is steadily increasing.

Acthar patients were getting about 23.7 units each in 2015, according to the most recently available government data. In 2013, about 2,400 Medicare Part D users were taking the drug, and they were getting 17.5 units on average.

This is way over the dosage guidelines that the prescription information for Acthar suggests. Bourdette said most patients should be getting only a handful of doses.

We also asked Bourdette, though, whether the doctors who were prescribing Acthar heavily were simply big on prescribing drugs across the board. He disputed that idea, too.

"According to the Medicare database these doctors do tend to prescribe more medications," Bourdette said. "But that doesn't explain Acthar because when it comes to Acthar they're prescribing 100-fold more."

Age before efficacy

Acthar was basically grandfathered into approval by the US Food and Drug Administration because the government didn't require clinical trials the way it does today when the drug was brought to market back in 1952.

Now it's classified as an "orphan drug" — a drug that treats rare diseases that affect fewer than 200,000 people in the country — but Mallinckrodt bought it with the intention of expanding its use.

"Mallinckrodt's goal has been — and continues to be — to acquire under-resourced, under-utilized products like H.P. Acthar Gel, which are utilized in areas of high unmet medical need, typically in narrow patient populations, and then for Mallinckrodt to invest significantly in those products," a representative for the company told Business Insider in an email. "The Company invests by building an even larger body of evidence to demonstrate which patients can benefit most from the drug and shares that information with physicians and payers to ensure those patients can get access to the product."

Surely you remember Daraprim — that was this guy, Martin Shkreli. AP Photo/Richard Drew These tactics have come under fire since 2015, when the 5,000% price increase of an AIDS-related treatment called Daraprim — by a tiny firm run by a former hedge fund manager named Martin Shkreli — shocked the US public.

Mallinckrodt knew what it was getting into with Acthar before it bought it. Like Daraprim, its price has been hiked substantially — to $38,000 from as little as $1,650 before 2007, something that made the drug the target of a New York Times profile that raised questions about its efficacy and noted that at least one major insurer — Aetna — was unwilling to pay for it to treat anything but infantile spasms.

Scrutiny of drug pricing and orphan drugs is far more intense now than it was in 2012, and it has come from lawmakers including President Donald Trump, who has suggested that Medicare should negotiate with drugmakers, and Sen. Chuck Grassley, an Iowa Republican who is looking into the orphan drugs and their privileged status.

That is why the investors who previously loved companies that bought old drugs and jacked up their prices are fleeing this business model.

'Marketing ploy'

Mallinckrodt and Acthar's previous owner, Questcor, have yet to produce any studies showing that Acthar is superior to its cheaper alternatives. In the case of MS, that alternative is methylprednisolone, an intravenous treatment that cost $1,000 to $2,000 as opposed to Acthar's $40,000.

The Mallinckrodt representative told Business Insider that the low number of physicians prescribing Acthar was "proportional" to the roughly 9,000 people who take it as a third- or fourth-line treatment when other medications fail. The person said that number "is growing as Mallinckrodt continues to generate data and introduce it to a whole new generation of physicians."

Bourdette doesn't buy that. Whether Acthar is a second-, third-, or fourth-line therapy, he still doesn't see why the drug should cost so much or be as widely used as it is.

"If they're using it to treat relapses, you would be an incredibly rare patient," he said in a phone call with Business Insider. "If you've got somebody resistant to steroids, there are so many more noncortical therapies."

Mallinckrodt, which has only owned Acthar for a little over two years, is conducting four company-sponsored controlled trials related to the drug's efficacy. Details on the studies, however, reveal that only one of them compares Acthar to alternative treatments.

Bourdette is skeptical of such phase four (post-FDA-approval) trials anyway. In the past some companies have used them to entice doctors to use their product, and doctors can even make a profit off of the studies if they're designed to come in under cost.

In these cases, Bourdette said: "It's not really a scientific research study — it's a marketing ploy."

Business Insider

Paid speakers

Mallinckrodt, like a lot of other drug companies, also has a speakers program through which it can book and pay doctors to talk about its drugs.

Typically, the top prescribers of Acthar not only have received payments from Mallinckrodt but also "are typically getting larger payments from companies that are developing disease-modifying therapies," Bourdette told us.

Business Insider reached out to the top 10 prescribers of Acthar, but they either did not respond to our requests for comment or would not comment on the drug.

One of these doctors is Robert Baughman, a professor of internal medicine at the University of Cincinnati who is collaborating with Mallinckrodt on a study on Acthar's efficacy curing patients with sarcoidosis, a disease that affects the lungs and lymph glands. This is part of the "investigator-initiated research," which Mallinckrodt supports financially through grants.

Based on his prescription behavior, Baughman clearly believes in the drug. He was the third-most-frequent prescriber of Acthar back in 2014, ProPublica's prescriber database shows. He has also received $21,625 for promoting Acthar from 2013 to 2015 (that's out of $116,000 for speaking and promotion fees for drugs during that period).

"Thanks for offer, but will have to say no," he said via email when we asked him to speak about the drug.

That said, what he's published about Acthar is not encouraging. Of 47 patients, 18 discontinued the program because of "cost (four patients), death (two patients), or drug toxicity (eleven patients), or noncompliance (1 patient)."

Only 11 of the 29 remaining patients saw some improvement in one or more organs after taking Acthar for three months.

Another top prescriber who does think Acthar is effective is Regina Berkovich, an assistant professor of clinical neurology at the University of Southern California. She published a paper back in 2013 arguing that Acthar was a good second-stage treatment for multiple sclerosis.

That same year she accepted $23,895 for talking about Acthar. That's out of $142,978 in speaking and other fees she collected that year.

The top prescriber of Acthar (making up 1% of all prescriptions) is an Ohio rheumatologist named David Mandel. He also did not respond to Business Insider's request for comment on the drug, and Acthar does not appear on his website's "treatments" page, though its competitor Humira does. From 2013 to 2015, Mandel has received $22,762 in speaking and other fees from Mallinckrodt for promoting Acthar, according to government disclosures.

Risk management

Speaker programs are turning into a new kind of risk for investors as they come under scrutiny by federal officials around the US.

Last year Salix, a pharmaceutical firm purchased by Valeant in 2015, paid a $54 million settlement to the Justice Department over its speakers program. Specifically, it was accused of using the programs "as a mechanism to pay kickbacks to doctors to induce them to prescribe SALIX drugs and medical devices that were reimbursed by federal healthcare programs." Forest Laboratories paid a $38 million fine for a similar offense.

And two Alabama doctors now face up to 20 years in prison for running an opioid "pill mill" out of their two Mobile clinics. They were discovered, in part, because back in February of last year a sales rep for Insys Therapeutics, the company that makes the powerful opioid fentanyl, admitted to paying them illegal kickbacks disguised as speaker fees.

Nobody is suggesting that Mallinckrodt is doing anything wrong. The company representative reiterated that the company's speaker program was "designed to be consistent with applicable legal and regulatory requirements, the PhRMA Code and industry best practices," referring to the drug-industry lobby.

And Mallinckrodt does acknowledge that the fact that its drug hasn't been tested is a danger to its business.

"Clinical trials demonstrating the efficacy for Acthar are limited," the company wrote in its annual report. "The absence of such clinical trial data could cause physicians not to prescribe Acthar, which could negatively impact our business, financial condition, results of operations and cash flows."

Until the drug has been tested against cheaper alternatives, and until the results of any such tests are published, investors, legislators and doctors will remain skeptical of Acthar's price tag and the system that allows for it.